Fifth Third Bank Analysis

Introduction

Consumer banking, also known as retail banking, provides services like transactional accounts, debit cards, mortgages, credit cards, savings and personal loans to the general public. These services are totally different from the services that banks provde to the big corporations or to other banks. The banking system under which these types of services are provided is commonly known as wholesale banking. Consumer banking is totally different from commercial or investment banking. In some banks, only a department or a division deals with the general public.

In The united States, the term commercial banking is normally used for a bank just to make that bank distinguish from the investment bank. Glass Steagall Act was made after the great depression, restricting normal banks to do only banking activities. As this act restricted the role of normal banks, it also restricted the investment banks to do activities that are only limited to the capital market. This distinction was reversed in the 1990’s (Tulkens, 1993). The term commercial bank is also referred to as a division of a bank or a whole bank that only deals with loans and deposits from large businesses and organizations, as compared to the general public.

Consumer banking is defined as the banks that provide financial and banking services to small-sized firms along with medium-sized firms as well as to individuals. Today, these banks are not only a bank that has a physical presence in the streets of every city, but these banks have provided mobile as well as internet services to the people on their mobile phones. These types of activities have provided value addition to the consumer or retail banking. Here is a graph that statsistically shows how much digital banking has increased in the over the period of five years (DW, 2017).

Discussion

As the world progressed, there came a concept of banking that runs through Internet services and saves the bank from the costs of physical structures, staffing, plastic card production, call centers and the cost that banks have to bear for the maintenance of their database. Consumer banks mainly offer two types of products: financial services and loans and savings. Services on saving accounts are deposit accounts, current accounts, term savings and individual accounts, while the services that they offer on loan products are credit cards, overdrafts, mortgage loans and personal loans. Major financial services that these banks provide are life insurance, health insurance, general insurance, endowment insurance, pensions, trustee services, wills and money transmission, stocks and shares, investment funds, unit funds, and foreign exchange (Johnston, 1997).

Most consumer or retail banks provide special bonuses to consumers if they open up an account with a specific amount of money. Banks do these types of activities because their ultimate goal is a maximum number of potential and existing customers (Hubbard, 1995). Banks assess the worth of their customers when they fill up the form for credit cards to get a new credit card or when an applicant applies for the opening of a new account.

Consumer banking has three major functions that are as follows (Siddiqi, 2011):

• Give Credit

Different banks offer credits to their clients at different interest rates, which help them in purchasing, and it also includes loans and mortgages. Giving credits to the clients makes the economy more liquidate.

• Accept Deposit

Everyone does not spend every penny he/she makes. People have the habit of saving money to make sure that they can get through every situation if they have saving at their back. For such types of people, a bank is a safe place for their money to be deposited. Banks offer an interest rate to the people who deposit their money in the bank as a savings account.

• Money Management

Consumer banks offer services to consumers to help them manage their money through cards and accounts, which help consumers to do transactions anytime and at any place.

The following are the types of consumer banking (Kleimeier, 2004):

• Private banks

These banks provide services to customers who have higher levels of assets and income and have a high net worth.

• Community development bank

These banks provide services to people who have a low level of income or moderate level of income.

• Postel saving banks

These banks provide services to people who don’t have direct access to the banks. These types of banks are convinenent and safe to deposit money. These banks provide services to the lower class of society.

Banks raise funds from commercial depositors and retail depositors to lend mortgages to customers. Then, these banks provide mortgages to the customers over a defined rate of interest.

Fifth Third Bank is a US based bank that is headquartered in Ohio and is a subsidiary of Fifth Third Bancorp. The main business of this firm is to provide services like consumer lending, commercial banking, payment processing, branch banking, title insurance, investment advising and investment banking.

The unusual name of this bank came into being as a result of a merger between Fifth National Bank and Third National Bank. Third National Bank, in comparison with Fifth National Bank, was a senior partner. The name of the bank after the merger was a big confusion, and it was changed many times till March 1969 when finally it was decided that the bank would be named Fifth Third Bank.

In 1999, Fifth Third Bancorp acquired the biggest thrifts in the United States, named Enterprise Federal Bancorp Inc. This bank also acquired Bank of Ashland and its mother company, Ashland Bankshares Inc. In 2000, This corporation also purchased Old Kent Bank, which gave this bank a big chunk of customers and more than 300 banking centers that were working at their full capacity. In 2007, this group acquired R-G Crown Bank, which gave a boost to the banking sector of this group by adding three branches in Georgia and 30 in Florida. Moreover, in 2007, they also acquired First Charter Bank. By acquiring this bank, the group entered the market of Atlanta with two branches while capturing 57 branches in the market of North Carolina (Seiford, 1999).

In January 2007, the group came under a controversy that it sales the data of its customers to some other organization. An article was written in The New York Times, which stated that this group is working with some organizations that use their data to reach the customers, and this bank is with all its will providing all the data to these companies and receiving a handsome amount against this. An investigation was started on this rumor but nothing was proven against the bank.

Conclusions

Retail banking or consumer banking has become popular since its existence. These banks are different from commercial and investment banks. These banks provide loan and mortgage services as well as deposit and saving services. Fifth Third Bank is gaining popularity since its existence is currently a big name in the retail banking industry. This industry became more popular since they introduced mobile and internet banking services so that the customer can make transactions anytime, sitting anywhere in the world.

References

https://www.statista.com/statistics/455418/number-of-digital-banking-users-usa/

Hubbard, R. G., & Palia, D. (1995). Executive pay and performance evidence from the US banking industry. Journal of financial economics, 39(1), 105-130.

Johnston, R. (1997). Identifying the critical determinants of service quality in retail banking: importance and effect. International Journal of Bank Marketing, 15(4), 111-116.

Sander, H., & Kleimeier, S. (2004). Convergence in euro-zone retail banking? What interest rate pass-through tells us about monetary policy transmission, competition and integration. Journal of International Money and Finance, 23(3), 461-492.

Seiford, L. M., & Zhu, J. (1999). Profitability and marketability of the top 55 US commercial banks. Management Science, 45(9), 1270-1288.

Siddiqi, K. O. (2011). Interrelations between service quality attributes, customer satisfaction and customer loyalty in the retail banking sector in Bangladesh. International Journal of Business and Management, 6(3), 12.

Tulkens, H. (1993). On FDH efficiency analysis: some methodological issues and applications to retail banking, courts, and urban transit. In Productivity Issues in Services at the Micro Level (pp. 179-206). Springer, Dordrecht.